U.S. industrial output surged 1.4 percent in March, the government said yesterday, indicating that the economy has shaken off the effects of last winter and is back on a healthy growth path.
In a separate development, the president's Council on Wage and Price Stability assailed the new national coal contract as "costly and inflationary," saying it will increase the cost of electricity and steel among the other things, and might cause other workers to step up their wage demands.
Both developments gave ammunition to those in Congress and the Administration who are arguing for reduction or postponement of the $25 billion cut in income taxes president Carter has proposed for next Oct. 1. Carter recommended that cut last January to ensure the economy continues to grow and generate new jobs later this year and next.
Since January, however, there has been a decline in unemployment but a revival of inflation.
Both the House and Senate Budget committees, as well as many members of the House Ways and Means Committee - which begins work on the tax legislation next week - feel the impact of the tax cut should be reduced in order to hold down next year's budget deficit and help contain inflation.
White House press secretary Jody Powell and Treasury Secretary W. Michael Blumenthal, however, both denied a report in yesterday's Washington Post that the Carter administration is considering cutting back its tax reduction proposal by $5 billion or more as a move against inflation.
Powell, who apparently was ordered by Carter to knock down the story in the strongest possible terms, called the report "totally false. There has been no consideration of such an action and I would envisage no consideration."
Powell and Blumenthal acknowledged there were discussions at the Economic Policy Group meeting Thursday of Federal Reserve Board Chairman G. William Miller's recommendation that the tax cut be delayed until Jan. 1. An economic projection of such a delay was requested by the economic officials.
But "this does not indicate a change of course for the administration." Blumenthal said. Powell said the legislators were being told the story is wrong.
Sources told The Post that while no decisions have been made, there is considerable support within the administration for changing the tax proposal. Powell sidestepped a question on whether any economic adviser had suggested trimming the tax cut, instead reiterating that based on what Carter told him, there would be no change in the tax revisions the administration is recommending.
There had been fears that the economy would fail to rebound this year as it did last from the cold and stormy weather that plagued much of the country in January and February.
While overall first-quarter economic statistics are expected to be disappointing, economists say that in recent weeks sales and production have perked up and yesterday's industrial production report from the Federal Reserve Board seems to confirm these indications.
Although for the quarter as a whole industrial production is only slightly higher than in the fourth quarter of last year. March output was up 1.4 percent, after a 0.8 percent decline in February.
The Federal Reserve said gains in Production were widespread. Automobile output, which had slipped sharply in December and early this year, "rose over to 13 percent to an annual rate of 9.3 million units." Automobile production is one of the most important parts of the economy. About one in six American jobs is somehow dependent on automobile output.
Automobile production continues strong in April, with some assembly lines working extra days and overtime.
The Federal Reserve said that output of nondurable consumer goods - such as food and clothing - increased 0.8 percent, while production of durable goods like cars and appliances rose 5.2 percent.